Tuesday, January 31, 2012

IMF official tells Romania it should limit public sector wage increases to help growth

By Associated Press, Monday, January 30

BUCHAREST, Romania — An International Monetary Fund official says Romania’s economy will grow slightly this year.

However, Jeffrey Franks told Prime Minister Emil Boc on Monday that his government should beware increasing public sector wages as it could hurt growth.

In 2010, the government cut public workers salaries by one-fourth and raised the sales tax to 24 percent to reduce the budget deficit. That caused discontent which erupted this year in two weeks of protesters around Romania.

Romania signed up for a €20-billion ($26 billion) loan with the IMF, European Union and World Bank in 2009 to help pay salaries and pensions as economy shrank by more than 7 percent.

The country holds elections in the fall and some analysts fear the government could raise salaries too much in order to gain popularity.

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